**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 **Washington,
D.C. 20549**
 ****
 
 **FORM
10-QSB**
 
 
 ( *Mark
One* )
 x  **QUARTERLY
REPORT UNDER SECTION 13 OR 15(d)**
 **OF
THE SECURITIES EXCHANGE ACT OF 1934**
 
 For
the quarterly period ended June 30, 2005
 
  ̈  **TRANSITION
REPORT UNDER SECTION 13 OR 15(d)**
 **OF THE SECURITIES EXCHANGE ACT
OF 1934**
 
 For
the transition period from  to __________
 Commission
file Number **000-22731**
 
 
 **MINERA
ANDES INC.**
 ( *Exact
name of small business issuer as specified in its charter* )
 
 **ALBERTA,
CANADA**
 ( *State
or other jurisdiction of incorporation or organization* )
 
 **NONE**
 ( *I.R.S.
Employer Identification No.* )
 
 **111
E. MAGNESIUM ROAD, SUITE A, SPOKANE, WA 99208**
 ( *Address
of principal executive offices* )
 
 **(509)
921-7322**
 ( *Issuer’s
telephone number* )
 
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x  No   ̈
 
 Shares
outstanding as of August 15, 2005: 90,549,719 shares of common stock, with no
par value
 
 Transitional
Small Business Disclosure Format ( *Check
One* ):
Yes   ̈ No x
 
 ************
 
 
 
 
 
   
   **TABLE
OF CONTENTS**
 
 
 
 PART I - FINANCIAL
      INFORMATION
    
    PageItem 1
    Consolidated Financial Statements
      (Unaudited) Consolidated Balance Sheets
    3Consolidated Statements of
      Operations and Accumulated Deficit
    4Consolidated Statements of Mineral
      Properties and Deferred Exploration Costs
    5Consolidated Statements of Cash
      Flows
    6Notes to Consolidated Financial
      Statements
    8Item 2
    Management’s Discussion and Analysis
      of Financial Condition and Results of Operations
    17Item 3
    Controls and Procedures
    22PART II -
      OTHER INFORMATIONItem 2
    Changes in Securities
    23Item 6
    Exhibits and
      Reports on Form 8-K
    23SIGNATURES
    
    24
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   2
   **MINERA
ANDES INC.**
 **“An
Exploration Stage Corporation”**
 **CONSOLIDATED
BALANCE SHEETS**
 **(U.S.
Dollars - Unaudited)**
 
 
 
 **June
      30,**
      **2005**
    
    **December
      31,**
      **2004****ASSETS**Current:Cash
      and cash equivalents
    
    $
    3,563,947
    
    $
    1,726,820Receivables
      and prepaid expenses
    
    
    87,022
    
    
    111,570Total
      current assets
    
    
    3,650,969
    
    
    1,838,390Mineral
      properties and deferred exploration costs (Note 4)
    
    
    4,010,816
    
    
    2,827,655Investment
      (Note 5)
    
    
    12,184,796
    
    
    7,345,840Equipment,
      net
    
    
    82,626
    
    
    97,655Total
      assets
    
    $
    19,929,207
    
    $
    12,109,540**LIABILITIES**Current:Accounts
      payable and accruals
    
    $
    266,267
    
    $
    257,268Bank
      loan interest payable
    
    
    21,943
    
    
    3,913Total
      current liabilities
    
    
    288,210
    
    
    261,181Bank
      loan (Note 6)
    
    
    1,734,282
    
    
    653,800Total
      liabilities
    
    
    2,022,492
    
    
    914,981**SHAREHOLDERS’
      EQUITY**Preferred
      shares, no par value, unlimited number
      Authorized,
      none issued
    
    
    --
    
    
    --Common
      shares, no par value, unlimited number authorizedIssued
      June 30, 2005 - 90,549,719 shares (Note 3)
      Issued
      December 31, 2004 - 71,586,806 shares
    
    
    36,617,024
    
    
    28,711,334Contributed
      surplus - stock option compensation (Note 7)
    
    
    1,681,850
    
    
    1,663,677Accumulated
      deficit
    
    
    (20,392,159
    )
    
    (19,180,452
    )Total
      shareholders’ equity
    
    
    17,906,715
    
    
    11,194,559Total
      liabilities and shareholders’ equity
    
    $
    19,929,207
    
    $
    12,109,540
 
 Approved
by the Board of Directors:
  /s/
Allen V. Ambrose **  /s/
Bonnie L.
Kuhn
 Allen
V. Ambrose, Director   Bonnie
L. Kuhn, Director
 
 *The
accompanying notes are an integral part of these consolidated financial
statements.*
   3
   **MINERA
ANDES INC.**
 **“An
Exploration Stage Corporation”**
 **CONSOLIDATED
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT**
 **(U.S.
Dollars-Unaudited)**
 **Three
      Months Ended**
    
    **Six
      Months Ended**
    
    **Period
      from**
      **July
      1, 1994**
      **(commencement)****June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **through**
      **June
      30, 2005**
      **(Cumulative)**Consulting
      fees
    
    $
    82,109
    
    $
    84,821
    
    $
    194,502
    
    $
    229,197
    
    
    
    
    $
    2,160,726Depreciation
    
    
    2,538
    
    
    8,514
    
    
    4,992
    
    
    17,371
    
    
    
    
    
    82,489Equipment
      rental
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    21,522Foreign
      exchange loss
    
    
    125,385
    
    
    154,688
    
    
    141,815
    
    
    116,150
    
    
    
    
    
    238,498Insurance
    
    
    18,265
    
    
    18,083
    
    
    35,520
    
    
    36,870
    
    
    
    
    
    357,591Legal,
      audit and accounting fees
    
    
    37,420
    
    
    53,495
    
    
    74,212
    
    
    134,498
    
    
    
    
    
    1,585,417Materials,
      supplies and maintenance
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    49,260Office
      overhead and administration fees
    
    
    140,766
    
    
    94,928
    
    
    187,183
    
    
    151,833
    
    
    
    
    
    2,575,927Telephone
    
    
    8,127
    
    
    6,244
    
    
    17,748
    
    
    15,162
    
    
    
    
    
    434,582Transfer
      agent
    
    
    2,264
    
    
    2,995
    
    
    3,211
    
    
    4,525
    
    
    
    
    
    119,967Travel
    
    
    32,208
    
    
    15,836
    
    
    54,864
    
    
    34,927
    
    
    
    
    
    513,691Wages
      and benefits
    
    
    80,009
    
    
    49,175
    
    
    132,022
    
    
    96,649
    
    
    
    
    
    2,189,039Write-off
      of deferred exploration costs
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    8,540,235Total
      expenses
    
    
    529,091
    
    
    488,779
    
    
    846,069
    
    
    837,182
    
    
    
    
    
    18,868,944Gain
      on sale of equipment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (112,330
    )Gain
      on sale of property
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (898,241
    )Loss
      on investment (Note 5)
    
    
    182,507
    
    
    --
    
    
    327,575
    
    
    --
    
    
    
    
    
    747,924Interest
      income
    
    
    (29,622
    )
    
    (24,793
    )
    
    (37,473
    )
    
    (39,661
    )
    
    
    
    
    (577,876
    )Net
      loss for the period
    
    
    681,976
    
    
    463,986
    
    
    1,136,171
    
    
    797,521
    
    
    
    
    
    18,028,421Accumulated
      deficit, beginning of the period,
      as
      previously reported
    
    
    19,710,183
    
    
    17,455,082
    
    
    19,180,452
    
    
    16,356,398
    
    
    
    
    
    --Adjustment
      for change in accounting for stock-based compensation (Note
    2)
    
    
    --
    
    
    --
    
    
    --
    
    
    678,569
    
    
    
    
    
    678,56919,710,183
    
    
    17,455,082
    
    
    19,180,452
    
    
    17,034,967
    
    
    
    
    
    678,569Adjustment
      on acquisition of royalty interest
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    500,000Share
      issue costs
    
    
    --
    
    
    --
    
    
    75,536
    
    
    86,580
    
    
    
    
    
    1,167,954Deficiency
      on acquisition of subsidiary
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    17,215Accumulated
      deficit, end of the period
    
    $
    20,392,159
    
    $
    17,919,068
    
    $
    20,392,159
    
    $
    17,919,068
    
    
    
    
    $
    20,392,159Basic
      and diluted net loss per common share
    
    $
    0.01
    
    $
    0.01
    
    $
    0.01
    
    $
    0.01Weighted
      average shares outstanding
    
    
    90,349,827
    
    
    70,205,463
    
    
    81,942,854
    
    
    66,066,105
 *The
accompanying notes are an integral part of these consolidated financial
statements* .
   4
   **MINERA
ANDES INC.**
 **“An
Exploration Stage Corporation”**
 **CONSOLIDATED
STATEMENTS OF MINERAL PROPERTIES**
 **AND
DEFERRED EXPLORATION COSTS**
 **(U.S.
Dollars-Unaudited)**
 **Three
      Months Ended**
    
    **Six
      Months Ended**
    
    **Period
      from**
      **July
      1, 1994 (commencement)****June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **through**
      **June
      30, 2005**
      **(Cumulative)**Administration
      fees
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    
    
    
    $
    392,837Assays
      and analytical
    
    
    61,361
    
    
    41,606
    
    
    86,850
    
    
    49,297
    
    
    
    
    
    1,144,667Construction
      and trenching
    
    
    7,932
    
    
    --
    
    
    7,932
    
    
    170
    
    
    
    
    
    534,283Consulting
      fees
    
    
    53,244
    
    
    15,778
    
    
    100,395
    
    
    39,470
    
    
    
    
    
    1,273,188Depreciation
    
    
    6,268
    
    
    --
    
    
    12,521
    
    
    --
    
    
    
    
    
    209,588Drilling
    
    
    396,110
    
    
    162
    
    
    396,110
    
    
    242,960
    
    
    
    
    
    1,589,393Equipment
      rental
    
    
    83,537
    
    
    --
    
    
    84,303
    
    
    132,688
    
    
    
    
    
    505,252Geology
    
    
    58,284
    
    
    85,333
    
    
    163,323
    
    
    291,591
    
    
    
    
    
    3,912,658Geophysics
    
    
    23,325
    
    
    --
    
    
    62,358
    
    
    --
    
    
    
    
    
    372,260Insurance
    
    
    1,853
    
    
    --
    
    
    1,853
    
    
    --
    
    
    
    
    
    257,412Legal
    
    
    18,183
    
    
    --
    
    
    40,058
    
    
    220
    
    
    
    
    
    781,545Maintenance
    
    
    4,584
    
    
    2,876
    
    
    5,424
    
    
    11,763
    
    
    
    
    
    186,638Materials
      and supplies
    
    
    12,408
    
    
    7,786
    
    
    26,207
    
    
    28,993
    
    
    
    
    
    501,480Project
      overhead
    
    
    15,307
    
    
    7,695
    
    
    30,788
    
    
    14,109
    
    
    
    
    
    416,446Property
      and mineral rights
    
    
    8,693
    
    
    12,379
    
    
    20,339
    
    
    41,269
    
    
    
    
    
    1,432,938Telephone
    
    
    9,417
    
    
    4,979
    
    
    16,301
    
    
    7,569
    
    
    
    
    
    125,317Travel
    
    
    26,339
    
    
    19,784
    
    
    63,592
    
    
    49,787
    
    
    
    
    
    1,277,606Wages
      and benefits
    
    
    33,639
    
    
    31,849
    
    
    64,807
    
    
    65,983
    
    
    
    
    
    1,361,285Costs
      incurred during the period
    
    
    820,484
    
    
    230,227
    
    
    1,183,161
    
    
    975,869
    
    
    
    
    
    16,274,793Deferred
      costs, beginning of the period
    
    
    3,190,332
    
    
    1,660,941
    
    
    2,827,655
    
    
    915,299
    
    
    
    
    
    --Deferred
      costs, acquired
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    576,139Deferred
      costs, contributed to MSC
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (2,320,980
    )Deferred
      costs written off
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (8,540,235
    )Mineral
      property option proceeds
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (1,978,901
    )Deferred
      costs, end of the period
    
    $
    4,010,816
    
    $
    1,891,168
    
    $
    4,010,816
    
    $
    1,891,168
    
    
    
    
    $
    4,010,816
 
 *The
accompanying notes are an integral part of these consolidated financial
statements.*
  5
 MINERA ANDES INC.   **“An Exploration Stage Corporation”**
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
 **(U.S.
Dollars-Unaudited)**
 **Three
      Months Ended**
    
    **Six
      Months Ended**
    
    **Period
      from**
      **July
      1, 1994**
      **(commencement)****June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **through**
      **June
      30, 2005**
      **(Cumulative)**Operating
      Activities:Net
      loss for the period
    
    $
    (681,976
    )
    $
    (463,986
    )
    $
    (1,136,171
    )
    $
    (797,521
    )
    
    
    
    $
    (18,028,421
    )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Write-off
      of incorporation costs
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    665Write-off
      of deferred exploration costs
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    8,540,235Loss
      on investment
    
    
    182,507
    
    
    --
    
    
    327,575
    
    
    --
    
    
    
    
    
    747,924Depreciation
    
    
    2,538
    
    
    8,514
    
    
    4,992
    
    
    17,371
    
    
    
    
    
    82,489Stock
      option compensation
    
    
    8,929
    
    
    3,313
    
    
    18,173
    
    
    34,179
    
    
    
    
    
    657,081Gain
      on sale of equipment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (112,330
    )Gain
      on sale of mineral properties
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (898,241
    )Change
      in:Receivables
      and prepaid expenses
    
    
    22,089
    
    
    7,063
    
    
    24,548
    
    
    23,741
    
    
    
    
    
    (87,022
    )Accounts
      payable and accruals
    
    
    11,507
    
    
    (321,534
    )
    
    8,999
    
    
    (15,900
    )
    
    
    
    
    266,268Due
      to related parties
    
    
    --
    
    
    (4,000
    )
    
    --
    
    
    (30,531
    )
    
    
    
    
    --Cash
      used in operating activities
    
    
    (454,406
    )
    
    (770,630
    )
    
    (751,884
    )
    
    (768,661
    )
    
    
    
    
    (8,831,352
    )Investing
      Activities:Incorporation
      costs
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (665
    )Purchase
      of equipment
    
    
    (2,044
    )
    
    (2,637
    )
    
    (2,485
    )
    
    (11,405
    )
    
    
    
    
    (303,815
    )Proceeds
      from sale of equipment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    14,225Proceeds
      from sale of property
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    898,241Mineral
      properties and deferred exploration
    
    
    (814,216
    )
    
    (230,227
    )
    
    (1,170,640
    )
    
    (975,869
    )
    
    
    
    
    (16,065,205
    )Investment
    
    
    (3,127,961
    )
    
    --
    
    
    (5,268,018
    )
    
    --
    
    
    
    
    
    (11,109,314
    )Proceeds
      from sale of subsidiaries
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    9,398Acquisition
      of royalty interest
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    
    
    
    (500,000
    )Mineral
      property option proceeds
    
    
    --
    
    
    --
    
    
    200,000
    
    
    200,000
    
    
    
    
    
    2,578,901Cash
      used in investing activities
    
    
    (3,944,221
    )
    
    (232,864
    )
    
    (6,241,143
    )
    
    (787,274
    )
    
    
    
    
    (24,478,234
    )
  6
  
 **MINERA
      ANDES INC.**
      **“An
      Exploration Stage Corporation”**
      **CONSOLIDATED
      STATEMENTS OF CASH FLOWS**
      **(U.S.
      Dollars-Unaudited)****Three
      Months Ended**
    
    **Six
      Months Ended**
    
    **Period
      from**
      **July
      1, 1994**
      **(commencement)****June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **Through**
      **June
      30, 2005**
      **(Cumulative)**Financing
      Activities:Shares
      and subscriptions issued for cash, less issue costs
    
    
    129,069
    
    
    147,426
    
    
    7,830,154
    
    
    4,630,052
    
    
    
    
    
    34,873,533Bank
      loan proceeds received
    
    
    --
    
    
    --
    
    
    1,000,000
    
    
    --
    
    
    
    
    
    2,000,000Cash
      provided by financing activities
    
    
    129,069
    
    
    147,426
    
    
    8,830,154
    
    
    4,630,052
    
    
    
    
    
    36,873,533Increase
      (decrease) in cash and cash equivalents
    
    
    (4,269,558
    )
    
    (856,068
    )
    
    1,837,127
    
    
    3,074,117
    
    
    
    
    
    3,563,947Cash
      and cash equivalents, beginning of period
    
    
    7,833,505
    
    
    6,164,527
    
    
    1,726,820
    
    
    2,234,342
    
    
    
    
    
    --Cash
      and cash equivalents, end of period
    
    $
    3,563,947
    
    $
    5,308,459
    
    $
    3,563,947
    
    $
    5,308,459
    
    
    
    
    $
    3,563,947Supplementary
      disclosure of cash flow information:Interest
      paid
    
    $
    23,200
    
    $
    --
    
    $
    30,537
    
    $
    --
    
    
    
    
    $
    30,537Non-cash
      investing and financing activities and other information:Stock
      option compensation
    
    $
    8,929
    
    $
    3,313
    
    $
    18,173
    
    $
    34,179
    
    
    
    
    $
    657,081Capitalized
      interest (Note 6)
    
    $
    43,072
    
    $
    --
    
    $
    98,512
    
    $
    --
    
    
    
    
    $
    102,426Depreciation
      capitalized to mineral properties
    
    $
    6,268
    
    $
    --
    
    $
    12,521
    
    $
    --
    
    
    
    
    $
    209,588Adjustment
      for change in accounting for stock-based compensation (Note
    2)
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    
    
    
    $
    678,569Deferred
      costs, acquired
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    
    
    
    $
    576,139Deferred
      costs, contributed to MSC
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    
    
    
    $
    2,320,980Shares
      issued for acquisition
    
    $
    --
    
    $
    --
    
    $
    --
    
    $
    --
    
    
    
    
    $
    575,537
 
 *The
accompanying notes are an integral part of these consolidated financial
statements.*
 
   7
   
 
 **MINERA
ANDES INC.**
 **“An
Exploration Stage Corporation”**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(U.S.
Dollars-Unaudited)**
 ****
  **1.
Accounting Policies, Financial Condition and Liquidity**


The
accompanying consolidated financial statements of Minera Andes Inc. for the
three and six month periods ended June 30, 2005 and 2004 and for the cumulative
period from commencement (July 1, 1994) through June 30, 2005 have been prepared
in accordance with accounting principles generally accepted in Canada which
differ in certain respects from principles and practices generally accepted in
the United States, as described in Note 11. Also, they are unaudited but, in the
opinion of management, include all adjustments, consisting only of normal
recurring items, necessary for a fair presentation. Interim results are not
necessarily indicative of results which may be achieved in the future. The
December 31, 2004 financial information has been derived from our audited
consolidated financial statements.
   www.sedar.com and with the Securities and Exchange Commission, in the United States. The
accounting policies set forth in the audited annual consolidated financial
statements are the same as the accounting policies utilized in the preparation
of these consolidated financial statements, except as modified for appropriate
interim presentation.
 
 The
recoverability of amounts shown as mineral properties and deferred exploration
costs is dependent upon the existence of economically recoverable reserves, the
ability to obtain necessary financing to complete their development, and future
profitable production or disposition thereof. The accompanying consolidated
financial statements have been prepared using accounting principles generally
accepted in Canada applicable to a going concern. The use of such principles may
not be appropriate because, as of June 30, 2005, there was substantial doubt
that we would be able to continue as a going concern.
 
 For
the six months ended June 30, 2005, we had a loss of approximately $1,136,000
and an accumulated deficit of approximately $20.4 million. In addition, due to
the nature of the mining business, the acquisition, exploration and development
of mineral properties requires significant expenditures prior to the
commencement of production. To date, we have financed our activities through the
sale of equity securities, loan facilities and joint venture arrangements. We
expect to use similar financing techniques in the future and are actively
pursuing such additional sources of financing.
 
 Although
there is no assurance that we will be successful in these actions, management
believes that they will be able to secure the necessary financing to enable it
to continue as a going concern. Accordingly, these financial statements do not
reflect adjustments to the carrying value of assets and liabilities, and the
reported revenues and expenses and balance sheet classifications used that would
be necessary if the going concern assumption were not appropriate. Such
adjustments could be material.
 
 Although
we have taken steps to verify title to mineral properties in which we have an
interest, in accordance with industry standards for the current stage of
exploration of such properties, these procedures do not guarantee title.
Property title may be subject to unregistered prior agreements and noncompliance
with regulatory requirements.
 
  8
  **2.
Change in Accounting Policy**
 
 Effective
January 1, 2004, we adopted, on a retroactive basis without restatement, the
recommendations of CICA Handbook Section 3870, “Stock-based compensation and
other stock-based payments”, which now requires companies to adopt the fair
value based method for all stock-based awards granted on or after January 1,
2002. Previously we were only required to disclose the pro forma effect of stock
options issued to employees and directors in the notes to the financial
statements. The effect of this change in accounting policy was to increase the
deficit at January 1, 2004 by $678,569 with a corresponding increase to reported
contributed surplus .
  **3.
Changes to Share Capital**
 **Number**
      **of
      Shares**
    
    ****
      **Amount**Balance,
      December 31, 2004
    
    
    71,586,806
    
    $
    28,711,334Issued
      for cash on exercise of options
    
    
    25,000
    
    
    3,234Issued
      for cash on exercise of warrants
    
    
    22,500
    
    
    9,230Issued
      for cash on exercise of broker warrants
    
    
    734,963
    
    
    209,773Issued
      for cash (private placement Cdn$0.55 each)
    
    
    18,180,450
    
    
    7,683,453Balance,
      June 30, 2005
    
    
    90,549,719
    
    $
    36,617,024
 
 During
the three months ended June 30, 2005, we issued 25,000 common shares for the
exercise of stock options and 445,215 shares for the exercise of broker warrants
with gross proceeds of $129,069.
 
 During
the three months ended March 31, 2005, we
issued 22,500 common shares for the exercise of purchase warrants and 289,748
shares for the exercise of broker warrants with gross proceeds of
$93,168.
 
 On
March 22, 2005, we sold 18,180,450 units to accredited investors at a price of
Cdn$0.55 per unit for net proceeds of Cdn$9,299,300 (US$7,683,453). Each unit
consists of one common share and one-half of one common share purchase warrant.
One whole common share purchase warrant entitles the holder to purchase one
additional common share at an exercise price of Cdn$0.70 per share for a period
of 5 years from the closing date. The issued securities are subject to a
four-month hold period. The agents received a cash commission of 7% of the gross
proceeds of the financing. The agents also received agent’s warrants equal to 7%
of the aggregate number of units sold pursuant to the offering. Each agent’s
warrant upon exercise will entitle the holder to acquire one common share at an
exercise price of Cdn$0.70 per common share for a period of 2 years from the
date of issue. A total of 18,180,450 common shares were issued pursuant to the
private placement, and 9,090,225 common shares are reserved for issuance on
exercise of the warrants and 1,272,632 common shares are reserved for issuance
on the exercise of the agent’s warrants.
  **4.
Mineral Properties and Deferred Exploration Costs**
  At
June 30, 2005, we, through our subsidiaries, hold interests in approximately
203,562 hectares of mineral rights and mining lands in three Argentine
provinces. Under our present acquisition and exploration programs, we are
continually acquiring additional mineral property interests and exploring and
evaluating our properties. If, after evaluation, a property does not meet our
requirements, then the property and deferred exploration costs are written off
to operations. Mineral property costs and deferred exploration costs, net of
mineral property option proceeds, are as follows:
  9
  
 **2005
      COSTS BY PROPERTY****Description**
    
    **San
      Juan Cateos**
    
    **Santa
      Cruz Cateos**
    
    **Chubut
      Cateos**
    
    **General
      Exploration**
    
    **Total**Balance,
      beginning of period
    
    $
    1,065,399
    
    $
    1,582,043
    
    $
    180,213
    
    $
    --
    
    $
    2,827,655Assays
      and analytical
    
    
    --
    
    
    86,850
    
    
    --
    
    
    --
    
    
    86,850Construction
      and trenching
    
    
    --
    
    
    7,932
    
    
    --
    
    
    --
    
    
    7,932Consulting
      fees
    
    
    1,872
    
    
    38,531
    
    
    6,596
    
    
    53,396
    
    
    100,395Depreciation
    
    
    --
    
    
    --
    
    
    --
    
    
    12,521
    
    
    12,521Drilling
    
    
    --
    
    
    396,110
    
    
    --
    
    
    --
    
    
    396,110Equipment
      Rental
    
    
    --
    
    
    84,303
    
    
    --
    
    
    --
    
    
    84,303Geology
    
    
    --
    
    
    145,596
    
    
    2,339
    
    
    15,388
    
    
    163,323Geophysics
    
    
    --
    
    
    62,358
    
    
    --
    
    
    --
    
    
    62,358Insurance
    
    
    --
    
    
    --
    
    
    --
    
    
    1,853
    
    
    1,853Legal
    
    
    --
    
    
    --
    
    
    --
    
    
    40,058
    
    
    40,058Maintenance
    
    
    --
    
    
    4,746
    
    
    --
    
    
    678
    
    
    5,424Materials
      and supplies
    
    
    25
    
    
    22,455
    
    
    177
    
    
    3,550
    
    
    26,207Project
      overhead
    
    
    56
    
    
    1,956
    
    
    602
    
    
    28,174
    
    
    30,788Property
      and mineral rights
    
    
    4,674
    
    
    14,652
    
    
    1,013
    
    
    --
    
    
    20,339Telephone
    
    
    1
    
    
    11,308
    
    
    10
    
    
    4,982
    
    
    16,301Travel
    
    
    56
    
    
    37,117
    
    
    65
    
    
    26,354
    
    
    63,592Wages
      and benefits
    
    
    1,124
    
    
    10,799
    
    
    --
    
    
    52,884
    
    
    64,807Overhead
      allocation
    
    
    6,050
    
    
    230,852
    
    
    2,936
    
    
    (239,838
    )
    
    --**Balance,
      end of period**
    
    **$**
    **1,079,257**
    
    **$**
    **2,737,608**
    
    **$**
    **193,951**
    
    **$**
    **--**
    
    **$**
    **4,010,816**
 
 
 The
San Juan Province project is comprised of six properties totaling 20,900
hectares (“ha”) in southwestern San Juan province. Land holding costs for 2005
are estimated at $1,616. Expenditures in the first half of 2005 relate to an
ongoing land maintenance and exploration program at the Los Azules
project.
 
 In
Santa Cruz, we control 20 cateos and 57 manifestations of discovery totaling
122,263 ha. Land holding costs for 2005 are estimated at $3,819. The first half
of 2005 expenditures on the Santa Cruz properties reflect the continuation of a
regional reconnaissance program.
 
 We
currently hold 20 manifestations of discovery, totaling 19,900 ha, in Chubut
province. Land holding costs for 2005 are estimated at $2,020. Expenditures in
the first half of 2005 relate to an ongoing reconnaissance exploration program
on lands acquired in 2002.
 
 
  10
  **5.
Investment (San José Project)**
 
 The
investment in Minera Santa Cruz S.A. is comprised of the following:
 
 **2005**Investment
      in MSC, January 1, 2005
    
    $
    7,345,840Plus:Deferred
      costs incurred
    
    
    270,531Advances
      during the period
    
    
    5,096,000Option
      agreement proceeds
    
    
    (200,000
    )Loss
      from equity investment
    
    
    (327,575
    )Investment
      in MSC, June 30, 2005
    
    $
    12,184,796
 
 The
San José project is owned by Minera Santa Cruz S.A. (“MSC”), an Argentine
corporation owned by Minera Andes Inc. (49%) and Mauricio Hoschschild & Cia.
Ltda. (“MHC”) (51%). Our obligation will be 49% of the exploration costs related
to the San José project, to maintain our interest in MSC.
 
 Deferred
costs incurred for $270,531 include, among other things, engineering consulting
costs, legal fees, and interest and finance costs related to our investment in
MSC.
 
 Subsequent
to June 30, 2005, we made payments of $2,842,000 to fund our 49% interest in the
San Jose project.
 
 **6.
Bank Loan**
 
 In
December 2004, we secured a two-year loan facility of up to $4 million from
Macquarie Bank Limited (“Macquarie”). All amounts advanced are due in December
2006. This facility is to be provided in two tranches to assist in funding our
49% portion of the costs of completing a bankable feasibility study and related
development work for the San Jose/Huevos Verdes gold/silver project in
Argentina.
 
 The
commercial terms of the loan include a facility fee of 1.5% of the principal
amount of each tranche at the time of the advance and interest of LIBOR plus 2%
per year, currently totaling approximately 5.5% per year. In addition, we issued
share purchase warrants to acquire 2,738,700 of our Common Shares at an exercise
price of Cdn$0.91 per share. The warrants exercise price was calculated at a 20
percent premium to the volume weighted average of our common stock determined
from the ten business days prior to acceptance of the loan facility. Each
warrant is exercisable for two years. The loan is collateralized by our interest
in Minera Andes S.A., our 49% interest in MSC, and personal
property.
 
 The
fair value of the warrants was calculated using the Black-Scholes option pricing
model with the following assumptions: dividend yield - Nil; risk free interest
rate - 3.53%; expected volatility of 62% and an expected life of 24 months. The
difference between the allocated fair value and the face value of the debt of
$346,200 was initially recorded as a debt discount with a corresponding entry to
contributed surplus. The debt discount is being accreted and capitalized to our
investment in MSC (Note 5) over the term of the debt using the effective
interest rate method. No amount of the discount was accreted in 2004 since the
debt agreement only became effective in December 2004. The accretion of the debt
discount began in January 2005.
 
  11
  We
received $1,000,000 of the first tranche in December 2004 and the remaining
$1,000,000 of the first tranche in February 2005. The bank loan and debt
discount are summarized as follows:
 
 Face
      Amount
    
    Discount
    
    Carrying
      ValueBank
      loan, initial tranche, being the balance at January 1,
2005
    
    $
    1,000,000
    
    $
    346,200
    
    $
    653,800Remainder
      of first tranche received
    
    
    1,000,000
    
    
    --
    
    
    1,000,000Accretion
      of debt discount
    
    
    --
    
    
    (80,482
    )
    
    80,482Bank
      loan, initial tranche, being the balance at June 30, 2005
    
    $
    2,000,000
    
    $
    265,718
    
    $
    1,734,282
 
 As
at June 30, 2005, interest expense incurred of $48,567, and accreted interest
expense related to the debt discount of $80,482 were capitalized to the
Investment in MSC (Note 5).
 
 Subsequent
to June 30, 2005, we received the second tranche of $2,000,000. In addition, we
issued share purchase warrants to acquire 3,987,742 of our Common Shares at an
exercise price of Cdn$0.62 per share. The warrants exercise price was calculated
at a 20 percent premium to the volume weighted average of our common stock
determined from the ten business days prior to acceptance of the loan facility.
Each warrant is exercisable for two years.
 
 **7.
Stock Options**
  A
summary of the status of the Company’s stock option plan as of June 30, 2005
is:
 
 **Options**
    
    **Weighted
      Ave.**
      **Exercise
      Price (Cdn)**Outstanding
      at January 1, 2005
    
    
    4,698,500
    
    $
    0.49Exercised
    
    
    (25,000
    )
    $
    0.16Outstanding
      at June 30, 2005
    
    
    4,673,500
    
    $
    0.49Exercisable
      at June 30, 2005
    
    
    4,643,500
    
    $
    0.49
 
 The
range of exercise prices is from Cdn$0.16 to Cdn$0.61 with a weighted average
remaining contractual life of 3.79 years at June 30, 2005.
 
 At
June 30, 2005, there were options held by directors, officers, employees and
consultants of the Company for the purchase of common shares as
follows:
 
 **Number
      of Shares**
    **Exercise
      Price**
    **Expiry
      Date**228,500
    Cdn$0.16
    August
      28, 2005715,000
    Cdn$0.40
    June
      27, 200725,000
    Cdn$0.36
    August
      27, 20081,500,000
    Cdn$0.59
    December
      5, 2008100,000
    Cdn$0.50
    March
      29, 20091,500,000
    Cdn$0.55
    September
      10, 200950,000
    Cdn$0.61
    December
      14, 2009555,000
    Cdn$0.31
    March
      21, 20134,673,500
 12
 
 Concerning
stock option compensation, the fair value of each option granted is estimated on
the date of grant using the Black-Scholes option-pricing model. The following
weighted average assumptions were used for employee and non-employee option
grants: ****
 ****
 ****
 **2005**
    
    **2004**Dividend
      yield (%)
    
    
    -
    
    
    -Expected
      volatility (%)
    
    
    82.5
    
    
    93Risk-free
      interest rates (%)
    
    
    3.40
    
    
    2.90Expected
      lives (years)
    
    
    5.0
    
    
    5.0
 
 We
recorded $18,173, and $34,179 of stock option compensation, related to the
vesting of certain non-employee stock options, during the six months ended June
30, 2005 and 2004, respectively.
  **8.
Warrants**
 
 **** **Warrants**
    
    **Cdn**
      **Wgt.
      Avg.**
      **Exercise
      Price**Outstanding
      and exercisable, January 1, 2005
    
    
    ****20,422,759
    
    $
    0.62Purchase
      warrants
    
    
    9,090,225
    
    $
    0.70Brokers’
      warrants
    
    
    ****1,272,632
    
    $
    0.70Exercised
    
    
    (757,463
    )
    $
    0.35Outstanding
      and exercisable, June 30, 2005
    
    
    30,028,153
    
    $
    0.66
 
 The
range of exercise prices on outstanding warrants is Cdn$0.35 to Cdn$0.91 with a
weighted average contractual life of 2.84 years at June 30, 2005.
  **9.** **Agreements,
Commitments and Contingencies**
  In
March 2005, MSC discovered an alleged employee fraud committed by the former
purchasing manager during the period June 2004 through March 2005. Respective to
our 49% interest, the fraud amounted to approximately $57,300 in 2004 and
$56,500 in 2005. MSC will vigorously pursue full recovery but the final amount
recoverable is not certain at this time. Canadian accounting standards require a
high level of certainty in recording a recovery on the balance sheet that is
contingent on future events, as a result the full amount of the fraud for each
period respectively, has been written off against our investment in MSC and is
included in our loss from equity investment (Note 5). Funds recovered in the
future related to the fraud will be recorded if and when they are
received.
  During
the six months ended June 30, 2005, MSC signed agreements with third party
providers for security services and mine and camp construction. Our 49 percent
portion of these commitments is approximately $824,000.
  **10.
Related Party Transactions**
 
 During
the period ended June 30, 2005 we incurred legal fees to a director and officer
totaling $24,775 (June 30, 2004 - $52,483). This transaction was in the normal
course of operations and was measured at the exchange amount, which is the
amount of consideration established and agreed to by the related
parties.
 13
 
 **11.
Differences Between Canadian and United States Generally Accepted Accounting
Principles**
 
 Differences
between Canadian and U.S. generally accepted accounting principles (“GAAP”) as
they pertain to the Company relate to accounting for the acquisition of Scotia
Prime Minerals, Incorporated, compensation expense associated with the release
of shares from escrow, mineral properties and deferred exploration costs,
stock-based compensation, warrants and bank loan and are described in Note 12 to
our consolidated financial statements for the year ended December 31, 2004 in
the 2004 10-KSB.
 
 During
2004, we adopted new Canadian GAAP rules regarding the utilization of the fair
value based method to account for options granted to employees. U.S. GAAP does
not require the fair value based method to account for employee based options as
of January 1, 2002. Since we have not granted any options to employees in 2005,
the retroactive adoption without restatement of the new Canadian requirements
has not created differences between Canadian and U.S. GAAP with respect to
shareholders’ equity at June 30, 2005 nor the net loss for the six months ended
June 30, 2005. There would however have been no adjustment to retained earnings
at January 1, 2004 under U.S. GAAP as was required under Canadian
GAAP.
 
 Under
Canadian GAAP, the corresponding entry to record the debt discount of $346,200
related to the warrants granted to Macquarie Bank in connection with a credit
facility (Note 6) was to contributed surplus. Under US GAAP, as the Company is
required to maintain its listed company status as part of the loan covenant, in
accordance with Emerging Issues Task Force (“EITF”) 00-19, the corresponding
entry to record the debt discount is to a liability. This would result in total
liabilities for US GAAP purposes to be $2,288,210, as at June 30, 2005 (December
31, 2004 - $1,261,181). Subsequent to the initial measurement, the discount is
remeasured on each balance sheet date based on the fair value of the warrants
with the adjustment charged to the Statement of Operations. The fair value of
the warrants, as at June 30, 2005, was calculated using the Black-Scholes option
pricing model with the following assumptions: dividend yield - Nil; risk free
interest rate - 3.53%; expected volatility of 50% and an expected life of 18
months.
  The
impact of the above on the interim consolidated financial statements is as
follows:
 
 **June
      30, 2005**
    
    **Dec.
      31,**
      **2004**Shareholders’
      equity, end of period, per Canadian GAAP
    
    $
    17,906,715
    
    $
    11,194,559Adjustment
      for mineral properties and deferred exploration costs
    
    
    (4,010,816
    )
    
    (2,827,655
    )Adjustment
      for investment
    
    
    (12,184,796
    )
    
    (7,345,840
    )Adjustment
      for fair value of warrants
    
    
    172,859
    
    
    --Adjustment
      for the debt discount
    
    
    (346,200
    )
    
    (346,200
    )Shareholders’
      equity, end of period, per
      U.S.
      GAAP
    
    $
    1,537,762
    
    $
    674,864
  14
  
 
 **Three
      Months Ended**
    
    **Six
      Months Ended**
    
    **Period
      from**
      **July
      1, 1994**
      **(commencement)****June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **June
      30,**
      **2005**
    
    **June
      30,**
      **2004**
    
    **through**
      **June
      30, 2005**
      **(Cumulative)**Net
      loss for the period, per Canadian GAAP
    
    $
    681,976
    
    $
    463,986
    
    $
    1,136,171
    
    $
    797,521
    
    $
    18,028,421Adjustment
      for acquisition of Scotia
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    248,590Adjustment
      for compensation expense
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    6,022,300Adjustment
      for fair value of warrants
    
    
    (130,332
    )
    
    --
    
    
    (172,859
    )
    
    --
    
    
    (172,859
    )Adjustment
      for deferred exploration costs, net
    
    
    820,484
    
    
    230,227
    
    
    1,183,161
    
    
    975,869
    
    
    4,010,816Adjustment
      for investment
    
    
    2,988,526
    
    
    --
    
    
    4,838,956
    
    
    (200,000
    )
    
    12,184,796Net
      loss for the period, per U.S. GAAP
    
    $
    4,360,654
    
    $
    694,213
    
    $
    6,985,429
    
    $
    1,573,390
    
    $
    40,322,064Net
      loss per common share, per U.S. GAAP,
      basic
      and diluted
    
    $
    0.05
    
    $
    0.01
    
    $
    0.08
    
    $
    0.02
 
 
 During
1995, we issued 336,814 Common Shares for the acquisition of Scotia Prime
Minerals, Incorporated (“Scotia”). Under U.S. GAAP, these shares would be valued
at $248,590, the fair market value of the shares issued. This value, plus the
$17,215 of net liabilities of Scotia assumed by the Company, would have been
recorded as property rights at the acquisition date under U.S.
GAAP.
 
 We
continue to account for stock-based compensation awarded to employees using the
intrinsic method. We did not grant any options to employees during the six
months ended June 30, 2005, therefore there was no pro-forma
difference.
  *New
U.S. Accounting Pronouncements*
 
 In
May 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
“Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20
and FASB Statement No. 3.” SFAS No. 154 changes the requirements for the
accounting for and reporting of a change in accounting principle. This Statement
applies to all voluntary changes in accounting principle. It also applies to
changes required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. The statement
requires retrospective application to prior periods’ financial statements of
changes in accounting principle, unless it is impracticable to determine either
the period-specific effects or the cumulative effect of the change. When it is
impracticable to determine the period-specific effects of an accounting change
on one or more individual prior periods presented, this statement requires that
the new accounting principle be applied to the balances of assets and
liabilities as of the beginning of the earliest period for which retrospective
application is practicable and that a corresponding adjustment be made to the
opening balance of retained earnings (or other appropriate components of equity
or net assets in the statement of financial position) for that period rather
than being reported in an income statement. When it is impracticable to
determine the cumulative effect of applying a change in accounting principle to
all prior periods, this statement requires that the new accounting principle be
applied as if it were adopted prospectively from the earliest date
practicable.
 15
 
 
 In
December 2004, the Financial Accounting Standards Board (“FASB”) issued (“SFAS”)
No. 123 (revised 2004), “Share-Based Payment.” SFAS No. 123(R) requires the
Company to measure all employee stock-based compensation awards using a fair
value method and record such expense in its consolidated financial statements.
In addition, SFAS No. 123(R) requires additional accounting related to the
income tax effects and additional disclosure regarding the cash flow effects
resulting from share-based payment arrangements. For public entities that do not
file as a small business issuer, SFAS No. 123(R) is effective for the first
annual reporting period beginning after December 15, 2005.
 
 In
December 2004, FASB issued SFAS No. 153 to amend Opinion 29 by eliminating the
exception for non-monetary exchanges of similar productive assets and replaces
it with general exception for exchanges of non-monetary assets that do not have
commercial substance. A non-monetary exchange is defined to have commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange.
 
 We
are assessing the effect on the consolidated financial statements as a result of
implementation of these new U.S. standards.
 
 **12.
Subsequent Events**
  In
July 2005, the company’s jointly owned company, Minera Santa Cruz, accepted a
letter offer to finance the advancement of the San Jose project. The US$50
million debt facility to be provided by Standard Bank and HVB is subject, among
other things, to completion of a bankable feasibility study, bank due diligence,
documentation and certain regulatory approvals. It is anticipated that the
facility will be available for drawdown in the 1 st quarter of 2006.  The facility is substantially non-recourse to Minera
Andes and Mauricio Hochschild.  As part of the overall facility amount,
there is a stand-by facility of up to US$5million available for unanticipated
cost over-runs prior to completion and commercial production.  The
commercial terms of the loan are customary for a loan of this nature and include
certain fees and expenses with interest rates of Libor + 3.0% pa prior to
project completion and LIBOR + 2.75 to 3.0% pa thereafter. Subject to the
completion of the definitive agreement for the debt facility, Minera Andes will
pay $250,000 in consulting fees for services rendered to obtain the facility.
   16
  **Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations**
 Prepared
as of August 12, 2005
 
 The
following discussion should be read in conjunction with Minera Andes’ audited
consolidated financial statements and notes thereto for the year ended December
31, 2004 and the unaudited consolidated interim financial statements and notes
thereto for the period ended June 30, 2005, which have been prepared in
accordance with generally accepted accounting principles (“GAAP”) in Canada.
These statements along with additional information relating to Minera Andes are
available on SEDAR at www.sedar.com .
Financial condition and results of operations are not necessarily indicative of
what may be expected in future years.
 
 All
amounts in this discussion are in US Dollars unless otherwise
indicated
 
 **Note
Regarding Forward-Looking Statements**
 
 The
information in this report includes “forward-looking” statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 (“1934 Act”), and is subject to the safe harbor
created by those sections. Factors that could cause results to differ materially
from those projected include, but are not limited to, results of current
exploration activities, the market price of precious and base metals, the
availability of joint venture partners or sources of financing, and other risk
factors detailed in our Securities and Exchange Commission filings.
 
 **Overview**
 
 Minera
Andes was incorporated in Alberta in July 1994 and went public in November 1995
through an amalgamation with Scotia Prime Minerals, Incorporated, also an
Alberta Corporation. We are a reporting issuer in Alberta, British Columbia,
Ontario and Nova Scotia and trade our common shares on the TSX Venture Exchange
under the symbol MAI. We are also a Form 10-KSB filer in the U.S. and trade on
the NASD OTCBB under the symbol MNEAF.
 
 The
principal business of Minera Andes is the exploration and development of mineral
properties, located primarily in the Republic of Argentina, consisting of
mineral rights and applications for mineral rights, covering approximately
203,562 hectares in three provinces in Argentina. We carry out our business by
acquiring, exploring and evaluating mineral properties through our ongoing
exploration program. Following exploration, we either seek to enter joint
ventures to further develop these properties or dispose of them if the
properties do not meet our requirements. Our properties are all early stage
exploration properties and no proven or probable reserves have been identified
except at one project where reserve definition is underway.
 
 Through
our subsidiaries and joint ventures we own a 49% equity interest in MSC, which
owns the San José gold/silver property in Southern Argentina, and a 100%
interest in over 10 mineral properties in Argentina. San José is currently in
advanced exploration and underground development and a production decision is
expected in the second half of 2005. The production decision originally
anticipated last year has taken longer due to positive exploration results which
expanded the exploration program and feasibility study underway at the San José
project. The program for 2005 consists of a comprehensive program with a
feasibility study that includes underground exploration/development totaling
about 3.5 kilometers of workings, environmental studies, metallurgical studies,
and construction with over 200 employees on site.
 
 The
2005 San José annual budget has been expanded from approximately US$17.0 million
to US$24.0 million, consisting of US$20.2 million in construction and reserve
development of the Huevos Verdes vein, US$1.5 million for the completion of the
feasibility study, and US$2.3 million for the exploration of additional targets
on the property. Minera Andes’ 49% portion of these costs is US$12.0 million of
which US$6.6 million had been paid through June 30, 2005. It is anticipated
that, following completion of a positive bankable feasibility study in the
second half of 2005, debt financing will be sought for the
 17
 remainder
of the required mine development budget. A letter offer for a limited recourse
loan facility for up to $50.0 million in project finance was signed for the
project in July 2005.
 
 Within
our mineral exploration land in Argentina our focus is primarily on gold, silver
and copper mineralized targets. In addition, several new exploration properties
have been acquired through the filing of mineral applications. These properties
reveal numerous similarities to Minera Andes’ San José property in northern
Santa Cruz province. Two properties, Cerro Mojón and San Agustin, contain
several mineralized structures with favorable geologic indicators and silver
values up to 10 ounces per ton and were drilled during the 2 nd quarter of this year. Other prospects contain structures with sinter-like quartz
veining.
 
 **Plan
of Operations**
 
 At
quarter end, we had working capital of approximately $3.5 million and access to
a credit facility of $2.0 million, which was drawn down subsequent to June 30,
2005. Assuming a positive feasibility outcome, MSC plans to seek non-recourse
debt financing to complete construction of the San José project and in July 2005
a letter offer was signed for a loan facility of up to $50 million. Funding
requirements for the project may change depending on exploration results,
changes in feasibility completion and production decision dates, and the time
needed to complete the debt financing.
 
 In
addition to planned expenditures on the San José project, we plan to spend $1.1
million on our mineral property and exploration activities and general and
administrative expenses through the remainder of 2005. We will be conducting
work on several properties including an ongoing reconnaissance program designed
to make new acquisitions. It is anticipated that exploration on other projects
and acquisition of new projects will require additional cash.
 
 **Results
of Operations**
 
 **Second
quarter 2005 compared with second quarter 2004**
 We
had a net loss of approximately $682,000 for the second quarter of 2005,
compared to a net loss of approximately $464,000 for the second quarter of 2004,
due to loss on investment and costs associated with our Annual and Special
Meeting and our investor relations program.
 
 **Six
months ended June 30, 2005 compared with six months ended June 30,
2004**
 We
had a net loss of approximately $1,136,000 for the six months ended June 30,
2005, compared to a net loss of $797,000 for the comparable period in 2004, due
to loss on investment. Total mineral property and deferred exploration costs
were approximately $1,183,000 during the six months ended June 30, 2005,
compared with approximately $976,000 spent in the same period of 2004. The costs
are associated with ongoing reconnaissance exploration programs, new property
acquisitions, evaluation of existing properties, and exploration at our Los
Azules project.
 
 Administrative
expenditures for the six months ended June 30, 2005 included $194,502 in
consulting fees. The costs are associated with our investor relations program
and stock compensation expense for consultants. Legal, audit and accounting
activities were $74,212 for the six months ended June 30, 2005 compared to
$134,498 in the same period last year. Travel for the six months ended June 30,
2005 was $54,864 compared with $34,927 in the same period in 2004. Foreign
exchange loss was $141,814 for the six months ended June 30, 2005 compared with
a loss of $116,150 in the same period in 2004, due to the effect of a
strengthening U.S. dollar offset by the associated impact on the value of cash
equivalents invested in Canadian dollar instruments.
 
 In
the six months ended June 30, 2005, we issued 18,180,450 units through a private
placement at a price of Cdn$0.55 per unit for gross proceeds of Cdn$10 million.
Under terms of the offering, each unit consists of one common share and one-half
of one common share purchase warrant. One whole common share purchase warrant
will entitle the holder to purchase one additional common share at an exercise
price of Cdn$0.70 per share for a period of 5 years from the closing date. Our
agents received a 7%
 18
 commission
and agents’ warrants equal to 7% of the aggregate number of units issued
pursuant to the offering. Each agent’s warrant upon exercise will entitle the
holder to acquire one common share at an exercise price of Cdn$0.70 per common
share for a period of 2 years from the date of issue. We intend to use the
proceeds from the offering to fund our investment in MSC and for general
corporate purposes.
  **Liquidity
and Capital Resources**
 
 Due
to the nature of the mining industry, the acquisition, exploration and
development of mineral properties requires significant expenditures prior to the
commencement of production. To date, we have financed our activities through the
sale of equity securities and joint venture arrangements. We expect to use
similar financing techniques in the future. However, there can be no assurance
that we will be successful with such financings. See “Plan of
Operations”.
 
 At
June 30, 2005 we had cash and cash equivalents of approximately $3.6 million
compared to approximately $5.3 million at June 30, 2004. Working capital at June
30, 2005 was approximately $3.4 million. Our operating activities used
approximately $752,000 in the first half of 2005 compared with using
approximately $769,000 in the first half of 2004. Administrative expenditures
for the period included approximately $194,000 in consulting fees (a decrease of
$35,000 over the same period last year); approximately $55,000 in travel;
approximately $187,000 in office overhead and approximately $18,000 in telephone
expenditures. These costs are due to our investor relations and public relations
program.
 
 Investing
activities used approximately $6.2 million, due to funding our 49% interest in
the San Jose project, less property option proceeds received, and expenditures
related to mineral properties and deferred exploration in the first half of 2005
compared with approximately $787,000 used in the first half of
2004.
 
 Financing
activities provided approximately $8.8 million, as a result of a private
placement, exercise of warrants and bank loan proceeds received in the first
half of 2005 compared with approximately $4.6 million provided in the first half
of 2004. Cash and cash equivalents increased in the first half of 2005 by
approximately $1.8 million in 2005 compared with an increase of approximately
$3.0 million in the same period in 2004.
 
 The
recoverability of amounts shown as mineral properties and deferred exploration
costs is dependent upon the existence of economically recoverable reserves, our
ability to obtain necessary financing to complete their development, and future
profitable production or disposition thereof. The accompanying consolidated
financial statements have been prepared using accounting principles generally
accepted in Canada applicable to a going concern. The use of such principles may
not be appropriate because, as of June 30, 2005, there was significant doubt
that we would be able to continue as a going concern. (See Auditor’s Comment in
the December 31, 2004 Audit Report and Note 1 in the December 31, 2004 Financial
Statements).
 
 For
the six months ended June 30, 2005, we had a loss of approximately $1,136,000
and an accumulated deficit of approximately $20.4 million. In addition, due to
the nature of the mining business, the acquisition, exploration and development
of mineral properties requires significant expenditures prior to the
commencement of production. To date, we have financed our activities through the
sale of equity securities, debt and joint venture arrangements. We expect to use
similar financing techniques in the future and are actively pursuing such
additional sources of financing.
 
 Although
there is no assurance that we will be successful in these actions, we believe we
will be able to secure the necessary financing to enable us to continue as a
going concern. Accordingly, these financial statements do not reflect
adjustments to the carrying value of assets and liabilities, the reported
revenues and expenses and balance sheet classifications used that would be
necessary if the going concern assumption were not appropriate. Such adjustments
could be material.
 19
 
 **Subsequent
Events**
 
 Subsequent
to June 30, 2005, we received the second tranche of $2,000,000 from
Macquarie.  In addition, we issued share purchase warrants to acquire
3,987,742 of our Common Shares at an exercise price of Cdn$0.62 per share. 
The warrants exercise price was calculated at a 20 percent premium to the volume
weighted average of our common stock determined from the ten business days prior
to acceptance of the loan facility.  Each warrant is exercisable for two
years.
 
 In
July 2005, the company’s jointly owned company, Minera Santa Cruz, accepted a
letter offer to finance the advancement of the San Jose project. The US$50
million debt facility to be provided by Standard Bank and HVB is subject, among
other things, to completion of a bankable feasibility study, bank due diligence,
documentation and certain regulatory approvals. It is anticipated that the
facility will be available for drawdown in the 1 st quarter of 2006.  The facility is substantially non-recourse to Minera
Andes and Mauricio Hochschild.  As part of the overall facility amount,
there is a stand-by facility of up to US$5million available for unanticipated
cost over-runs prior to completion and commercial production.  The
commercial terms of the loan are customary for a loan of this nature and include
certain fees and expenses with interest rates of Libor + 3.0% pa prior to
project completion and LIBOR + 2.75 to 3.0% pa thereafter. Subject to the
completion of the definitive agreement for the debt facility, Minera Andes will
pay $250,000 in consulting fees for services rendered to obtain the
facility.
 
 **Critical
Accounting Policies**
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make a wide variety of estimates
and assumptions that affect (i) the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the
financial statements, and (ii) the reported amounts of revenues and expenses
during the reporting periods covered by the financial statements. Our management
routinely makes judgments and estimates about the effect of matters that are
inherently uncertain. As the number of variables and assumptions affecting the
future resolution of the uncertainties increases, these judgments become even
more subjective and complex. The most significant accounting policies that are
most important to the portrayal of our current financial condition and results
of operations relate to mineralization and deferred development costs.
 
 Mineral
properties consist of exploration and mining concessions, options and contracts.
Acquisition and leasehold costs and exploration costs are capitalized and
deferred until such time as the property is put into production or the
properties are disposed of either through sale or abandonment. If put into
production, the costs of acquisition and exploration will be depreciated over
the life of the property, based on estimated economic reserves. Proceeds
received from the sale of any interest in a property will first be credited
against the carrying value of the property, with any excess included in
operations for the period.
 
  We
review the carrying value of our investment in MSC and in other mineral
properties on a regular basis. This review includes, but is not limited to, the
timing of exploration and/or development work, work programs proposed, the
exploration results achieved by Minera Andes and others, sales and/or joint
venture value, current market price of minerals, ability to finance ongoing
development and, in the case of producing properties, the estimated future
operating results and net cash flows. When the carrying value of a property is
estimated to exceed its net recoverable amount, provision is made for the
decline in value. If a property is abandoned, the property and deferred
exploration costs will be written off to operations.
 
 **New
U.S. Accounting Pronouncements**
 
 In
May 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
“Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20
and FASB Statement No. 3.” SFAS No. 154 changes the requirements for the
accounting for and reporting of a change in accounting principle. This Statement
applies to all voluntary changes in accounting principle. It also applies to
changes required by an accounting pronouncement in the unusual instance that the
pronouncement does
 20
 not
include specific transition provisions. The statement requires retrospective
application to prior periods’ financial statements of changes in accounting
principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. When it is impracticable to
determine the period-specific effects of an accounting change on one or more
individual prior periods presented, this statement requires that the new
accounting principle be applied to the balances of assets and liabilities as of
the beginning of the earliest period for which retrospective application is
practicable and that a corresponding adjustment be made to the opening balance
of retained earnings (or other appropriate components of equity or net assets in
the statement of financial position) for that period rather than being reported
in an income statement. When it is impracticable to determine the cumulative
effect of applying a change in accounting principle to all prior periods, this
statement requires that the new accounting principle be applied as if it were
adopted prospectively from the earliest date practicable.
 
 In
December 2004, the Financial Accounting Standards Board (“FASB”) issued (“SFAS”)
No. 123 (revised 2004), “Share-Based Payment.” SFAS No. 123(R) requires the
Company to measure all employee stock-based compensation awards using a fair
value method and record such expense in its consolidated financial statements.
In addition, SFAS No. 123(R) requires additional accounting related to the
income tax effects and additional disclosure regarding the cash flow effects
resulting from share-based payment arrangements. For public entities that do not
file as a small business issuer, SFAS No. 123(R) is effective for the first
annual reporting period beginning after December 15, 2005.
 
 In
December 2004, FASB issued SFAS No. 153 to amend Opinion 29 by eliminating the
exception for non-monetary exchanges of similar productive assets and replaces
it with general exception for exchanges of non-monetary assets that do not have
commercial substance. A non-monetary exchange is defined to have commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange.
 
 We
are assessing the effect on the consolidated financial statements as a result of
implementation of these new U.S. standards.
 
 See
Note 11 in the Financial Statements.
 
  21
  **Item
3. Controls and Procedures**
 
 **Evaluation
of Disclosure Controls and Procedures**
 
 As
of the end of the period covered by this report, we carried out an evaluation of
the effectiveness of the design and operation of our “disclosure controls and
procedures” (as defined in the Securities Exchange Act of 1934 (“Exchange Act”)
Rules 13a-14(c) and 15d-14(c)) under the supervision and with the participation
of management, including our President and Chief Financial Officer. Based upon
that evaluation, our President and Chief Financial Officer concluded that our
disclosure controls and procedures are effective.
 
 Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in Company reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include, but
are not limited to, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management to allow timely decisions regarding
required disclosure.
 
 **Changes
in Internal Controls**
 
 There
were no significant changes in our internal controls or, to our knowledge, in
other factors that could significantly affect our disclosure controls and
procedures subsequent to the date we carried out this evaluation.
  22
  **PART
II - OTHER INFORMATION**
 Item 2.  Changes in Securities
  During
the six months ended June 30, 2005, we
issued 25,000 commons shares for the exercise of stock options, 22,500 common
shares for the exercise of purchase warrants and 734,963 shares for the exercise
of broker warrants with gross proceeds of US$222,237.
  On
March 22, 2005, we sold 18,180,450 units to accredited investors at a price of
Cdn$0.55 per unit for net proceeds of Cdn$9,299,300 (US$7,683,453). Each unit
consists of one common share and one-half of one common share purchase warrant.
One whole common share purchase warrant entitles the holder to purchase one
additional common share at an exercise price of Cdn$0.70 per share for a period
of 5 years from the closing date. The issued securities are subject to a
four-month hold period. The agents received a cash commission of 7% of the gross
proceeds of the financing. The agents also received agent’s warrants equal to 7%
of the aggregate number of units sold pursuant to the offering. Each agent’s
warrant upon exercise will entitle the holder to acquire one common share at an
exercise price of Cdn$0.70 per common share for a period of 2 years from the
date of issue. A total of 18,180,450 common shares were issued pursuant to the
private placement, and 9,090,225 common shares are reserved for issuance on
exercise of the warrants and 1,272,632 common shares are reserved for issuance
on the exercise of the agent’s warrants.
  In
reliance on Rule 903 of Regulation S under the Securities Act of 1933, as
amended (the “Securities Act”), units were offered and sold to purchasers
outside of the United States subject to Category 2 offering restrictions,
without any directed selling efforts. In reliance on Rule 506 of Regulation D
under the Securities Act, units were also offered and sold, without general
solicitation or advertising and subject to resale restrictions, to accredited
investors in the United States who represented they were purchasing with
investment intent and without a view to distribute the units.
  
 **Item
      6.**
    ****
    ****
      **Exhibits**
 
 **Exhibit****Number**
    **Identification
      of Exhibit**31.1
    Certification of President (Principal Executive Officer)
      pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002.31.2
    Certification of Chief Financial Officer (Principal
      Financial Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
    Certification of President pursuant to 18 U.S.C. Section
      1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
    Certification of Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted, pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
 23
 
 **SIGNATURES**
 
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. **** ****
 ****MINERA
ANDES INC.****
 
 Date: **** August
15,
2005      By: /s/
Allen V. Ambrose
 Allen V. Ambrose
 President
 
 
 Date: August
15,
2005   By: /s/
William V. Schara
 William V. Schara
 Chief Financial Officer